Winning the award

The Deputy Prime Minister has stepped in to save the industry from an award that could have hammered many businesses.

With the stroke of a pen, Deputy Prime Minister Julia Gillard has saved thousands of jobs and millions of dollars in costs for the industry. By Rob Johnson

In a major victory for restaurateurs and caterers, Deputy Prime Minister Julia Gillard has written to the Australian Industrial Relations Commission (AIRC) directing them to develop a modern award that takes into account the special circumstances of restaurant and catering businesses. Up until a couple of weeks ago, the industry was fighting a proposed Hospitality Industry Award created by the AIRC which would have cost employers in the restaurant, café and catering sector between $150 million and $250 million, and destroyed 8000 jobs.

But on May 29, the Minister wrote to Justice Geoff Giudice, President of the AIRC, varying her Award Modernisation request to specifically address the restaurant and catering industry, saying:

“The Commission should create a modern award covering the restaurant and catering industry, separate from those sectors in the hospitality industry providing hotelier, accommodation or gaming services. The development of such a modern award should establish a penalty rate and overtime regime that takes account of the operational requirements of the restaurant and catering industry, including the labour intensive nature of the industry and the industry’s core trading times.”

Restaurant & Catering Australia was delighted with the news, coming as it did after more than a year’s work behind-the-scenes in Canberra. Speaking the day after the Minister’s request was leaked to a newspaper, R&CA CEO John Hart said; “[Deputy PM Gillard] is getting behind the principle of what modern awards were meant to be and enabled the Commission to move on to truly reframing our industrial environment.”

The Deputy Prime Minister went further in her letter accompanying the request, saying, “Upon examination, I share the restaurant, café and catering industry’s concerns about the potential for the modern award to increase business costs and I am of the view that the issue warrants further examination by the Commission”.

Over the past twelve months, R&CA has argued for a genuinely simple Modern Award for employees in the restaurant and catering sector before two full hearings in the Industrial Relations Commission. In doing so it has submitted more than 2000 pages of evidence supporting their case, including economic modelling of the impact of Modern Awards done by Econotech and wage cost modelling by Business Group Australia. It’s also spent a quarter of a million dollars, including significant legal fees, and spent hours briefing MPs and other interested parties on their case.

The problem posed by the AIRC’s first Hospitality Award was that restaurants would have to pay a 10 per cent evening penalty loading, 25 per cent on Saturdays, 175 per cent on Sundays and 250 per cent for public holidays. Casuals would get another 25 per cent.

It was essentially a cut-and-paste of the federal hotels award. “The Commission only knew the hotel sector,” says John Hart. “Clubs, motels and ourselves were part of the history of State awards. So on one level it wasn’t surprising their reaction is to cut and paste hotels awards onto everyone else.”

The suggested award would have most affected the restaurant cultures of Queensland, New South Wales and South Australia, with minor changes in West Australia, and no change in Victoria, the ACT, the Northern Territory and Tasmania.

The irony was R&CA was very supportive of the Award Modernisation process when first proposed, without knowing the AIRC would draft a hospitality award that posed such a potential threat to the industry: “Before the last election the government’s promise was they would introduce a new IR regime and the centrepiece was new Awards,” says R&CA CEO John Hart. “At the core of this promise was their aim to create a national system with consistent modern national awards. Prior to the election we went through the exercise of comparing the then-Government’s policy with the proposed policy of the Labor party, and we said we supported the concept of Modern Awards.”

The cruellest part of the proposed changes came when you saw the projected employment growth from the Department of Education, Employment and Workplace Relations, which predicts employment growth of about 2.2 per cent over the next five years. “We are the ones that are still growing,” Hart points out. “Why take advantage of those providing the stability?”

All of that changed when the Deputy Prime Minister stepped in and requested the AIRC go back to the drawing board.

In making the request to the AIRC, the Minister was resolving a contradiction that had appeared between the election and the present. In the Award Modernisation Request last year, which empowered the AIRC to publish new awards, Julia Gillard specified that the creation of modern awards was not intended to disadvantage employees or increase costs for employers. Unfortunately, the Commission could not reconcile those two objectives. As a result, the Minister revised her desires, saying the cost to employers would be phased in over a five-year period.

In the Minister’s Second Reading Speech – Fair Work (Transitional Provisions and Consequential Amendments) Bill, she said: “The Act allows for any differences between current state award conditions and the new federal standard to be phased in over a full five year period.”

However, the five-year window didn’t really address the serious concerns the industry had about having to work under the same award as hotels. R&CA mounted a vigorous public campaign to try to convince the Commission and the government that the conditions about to be imposed on restaurants could result in an industry where restaurants shut their doors at 7pm, and never open them on Sundays.

When the AIRC replied by saying restaurants would be covered under the general award, things looked grim.

“There was some chance we’ll see a lower-than-otherwise increase from the minimum wage increase for the next two years, but that will lessen the impact on everyone, so restaurants, caterers and the retailers still end up bearing the brunt,” said Hart at the time. “The government will say that’s because we pay the least, but it’s our industries that can least afford to pay.”

However, it was obvious that the Minister was listening. In her letter to the President of the AIRC, she said; “I have been provided with material that supports the claims that the modern award would result in significant cost increases for the restaurant, café and catering sector in many states and that the capacity of that sector to bear such increases, even with transitional arrangements, is limited.

“Data from the Australian Bureau of Statistics show that cafes, restaurants and catering services are characterised by comparatively low profit margins and high labour costs as a proportion of total expenses. Moreover, the industry has a very high award reliance.

“For example, in 2006-07, labour costs comprised 36.4 per cent of expenses. The average profit margin was 3.8 per cent for cafes and restaurants and 5.3 per cent for catering services businesses. This compares with 12.7 per cent for all industries. Furthermore … [the broader industry] has a higher proportion of award-reliant employees than any other industry.”

When the Minister’s letter was leaked to The Weekend Australian, it would be fair to say there was a collective sigh of relief. “We’re pleased that the Minister regarded the jobs in our industry as worth saving,” says John Hart. “And she’s demonstrated an appreciation of the value of our industry to the economy and to employment.”

Now the issue is back in the hands of the AIRC to find a resolution that fits with the original request—a modern award that doesn’t disadvantage employers or employees.

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